Swaziland-based Casino Enterprises has lost its bid to have its operations declared legal in SA, in a landmark judgement handed down in the Bloemfontein Supreme Court of Appeals.
The ruling settles once and for all the question of where online gambling takes place, and could have consequences for other online transactions.
Online gambling may still be legalised in SA as the Gambling Review Commission has recommended that online wagering be made legal, and more than 10 licences issued. However, the current framework is unlikely to be changed for at least another two years, due to the lengthy processes required.
Yesterday, judge Jonathan Heher handed down a ruling in the appeal court, saying interactive - or online - gambling takes place where the player is, and not where the casino's servers are located.
Casino Enterprises, operator of the popular Piggs Peak Casino, Piggs Peak Poker, Piggs Peak Bingo and Volcanic Gold Casino, appealed a North Gauteng High Court ruling that declared online gambling illegal. The case was heard on 23 August.
Last August, judge Neil Tuchten ruled that the act of gambling takes place at the punter's computer, and not where the server is located. Casino Enterprises had appealed the Gauteng Gambling Board's declaration that advertising online gambling was illegal.
Physical gambling was legalised in SA in 1996 and has since skyrocketed into a multibillion-rand industry. Revenue earned by brick-and-mortar outlets doubled between 2001 and 2009. In the year to March 2010, the latest available figures, punters waged R215.8 billion, which earned the state R1.6 billion in taxes.
However, those are only the figures from the official, legal sector and do not include money waged online.
Online gambling was set to be legalised after legislation was passed by Parliament in 2007. However, no licences were ever issued and the regulations, published for comment in 2009, were not supported by Parliament's Trade and Industry Portfolio Committee. As a result, interactive gambling is illegal unless the law is amended.
No more bets
Piggs Peak had continued to operate, pending the outcome of the appeal case. However, yesterday its Web site put up a notice saying it “will no longer accept bets from any players in SA”.
Heher said South African punters who place bets online do so within the borders of the country, and not in Swaziland. Online gambling is not provided for in the current legislation, he said.
“The prospective player is 'seduced' in SA, he or she takes and activates the crucial decision to gamble here, he or she is impoverished here; the Internet casino intrudes upon the field of licensed operators here and it does so without payment of dues to the state,” said Heher in his ruling.
“If gambling takes place in SA it is of no consequence what means are employed to facilitate it and whether those means are employed outside the country.”
Heher also ruled that “the opportunity to gamble is being offered to the would-be player wherever it finds him or her with a computer link to the Internet, which usually means in the home or office”. In addition, the judge said advertising online gambling is illegal.
Far-reaching consequences
Nicholas Hall, an attorney with Michalsons Attorneys, says the landmark ruling could have implications for any sort of online transactions. He explains that the decision sets parameters for where deals take place and determines jurisdiction.
Hall says the matter of where transactions takes place was previously “ambiguous” as there was no clear case law to settle this issue.
However, Hall expects the decision to only have a temporary impact on the online gambling industry, as government is considering legalising the sector. He does not know whether the ruling will result in the prosecution of people who gamble online illegally, or the entities that offer the service in SA.
The National Gambling Board has said a ruling confirming the illegality of interactive gambling would enable it to prosecute operators and punters as it would provide a solid precedent.
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